Founders at Work.pdf

430 Founders at Work
We had other great members of the board. We felt that most of the venture
capital community added a lot of value—also in terms of contacts, we were very
positive about that.
We grew very quickly, and at one point we had a market valuation of
approaching half a billion dollars, about $450 to $475 million.
Livingston: Wow.
Gruner: That was back in the ’80s. But then we absolutely hit the wall.
Livingston: Why?
Gruner: A couple of things happened. We were significantly late on one of the
next generations of our computers. You would think that high-performance
computers designed out of the most advanced parallel processing technology,
with a number of patents behind it, would be a highly differentiated product. In
reality, it was just the opposite of that.
High-performance computers are the ultimate commodity. The reason is
that the customer comes in and says, “Here’s my benchmark; here’s my program.
Run this on your computer and tell me how long it takes to run.” So they
wind up buying a computer based on performance divided by dollars,
megaflops per dollar. It’s just like buying a tank of gas.
When you miss a generation—when you miss a major product cycle or
you’re late significantly, and the competition has caught up with you and they’re
providing performance that’s better or the same as yours—you’re at a very significant
loss because that’s really all that matters. We were selling engineering
or scientific computers. Ease of use, reliability, and all those things were small
factors. The major factor was, “How fast is your machine and what’s it cost?”
The other thing that affected us, that we just simply weren’t smart enough
to turn on a dime, was the workstation. It’s a market that’s disappeared now
completely, but workstations were personal computers that sat on a desk of an
engineer or scientist that they could use for computing rather than having to
send their job to a centralized computer facility, run it, and then get the results
back the next morning. Workstations began to really take off in the mid ’80s.
Sun Microsystems and Apollo Computer pioneered that.
As that was coming, the personal computer was getting faster and faster all
the time. So many of our large customers—Bell Labs for example—stopped
buying the large computers like Vaxes and our kinds of machines and started
buying workstations and personal computers.
At the same time that was going on, the Cold War was coming to an end.
Many of our customers were defense-related. Major customers were large
intelligence agencies in the United States, for example, or other defenserelated
applications. So that market dried up. Revenues turned down very
steeply in the late ’80s.
Livingston: How did your investors react?
Gruner: We had a situation where a lot could be learned about the pros and
cons of using venture capital. Things were going south quickly and badly. We at
the board level had to make a decision as to what we should do. One part of the